How much cash do you have hidden around your home?
If the answer is more than $100, then you have too much cash in your house.
We all keep a little money on hand for those rare occasions – like the times you need cash because the neighborhood kid offers to shovel your driveway or mow your lawn. You want to help the enterprising young child but don’t want the hassle of driving to an ATM, so you keep some cash around the house. But if you’re hiding money in your home because you don’t feel it’s safe in a bank, you’re making a huge mistake.
During the recession, when everyone was panicking because banks were failing, lots of people decided their cash was safer in their home and out of the bank. In reality, that’s not true. Here’s why:
1. You aren’t earning interest on your money.
The best financial reason for not leaving cash at home is that you don’t earn any interest on your savings. The interest from a bank may not seem like a lot, especially given low interest rates, but every bit counts.
It’s far better to keep your funds tucked away in an Federal Deposit Insurance Corporation-insured bank or credit union where it will earn interest and have the full protection of the FDIC.
Speaking of protection …
2. You may not be protected if it is stolen or destroyed in the event of a robbery or fire.
Renters and homeowners insurance typically do not have high limits when it comes to protecting the loss or theft of cash within your home. You need to review your policy in order to know what your limit is, but it could be as low as $200.
This means if someone steals your hidden cash, it’s most likely gone for good. You won’t be reimbursed unless you have a separate rider, which seems silly to pay for just to keep cash in your home.
3. You might accidentally throw it out or leave it behind.
In 2006, a contractor was renovating a bathroom and found $182,000 of Depression-era money in the walls. The moral of the story: Don’t hide money in places you won’t remember.
It’s very easy to forget where you hid your rainy day fund if you are really good at hiding it. The last thing you want to do is forget where it is or accidentally throw it out.
Even if you think you’ll remember, someone else find it, or worse, rid of it. In 2009, a woman in Tel Aviv gave her mom a new mattress and threw away the old one. There was just one problem – the mom had hidden $1 million of her savings inside the old one. Now they just have sad photos of them searching through a dump for the million-dollar mattress.
So do you really need to keep cash at home?
What’s the reasoning behind keeping cash at home? Do you think you’ll need it for some future need? If you can’t think of any immediate reason – in other words, a need within the next week or so – then it's not necessary to stash cash at home.